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Retirement planning is usually not a priority many young couples.

As you're both becoming established in your careers you have several monthly bills that you have to tend to. They usually include:

  • Rent/Mortgage
  • Monthly bills (utilities, insurance, etc.)
  • Car payments
  • Student loans

For some couples, there isn't any money left once they've taken care of their other obligations. Retirement is so far away in your timeline, it’s tempting to put it off for a bit or keep your contributions to a minimum (if at all).

I want you to know that it is possible to get started with investing, even if you don't have a huge amount.

I've included a small guide on how you can set up an IRA  and maintain your contributions. Hopefully, you can use it as a jumping point and build from it.

Key Investing Principles to Remember

If you're looking for an easy and effective way to invest, The Coffeehouse Investor author Bill Schultheis lays out his investing philosophy:

  • Save for a rainy day. (Develop a long term financial plan)
  • Don’t put all your eggs in one basket. (Diversify in different asset classes.)
  • There is no such thing as a free lunch. (Capture the entire return of each basket, or asset class, through low cost index funds).

Deciding What to Include when Investing for Retirement

You have to adjust and tailor your portfolio to fit your needs. If you're looking at a guideline to follow, I based my asset allocation on David Swendsen's model.

Swendsen has had a long track record of solid returns at Yale. He released a book for regular investors called Unconventional Success: A Fundamental Approach to Personal Investment, and he shared his ideas on how average people can improve their returns.

He offers the following recommendations:

  • Domestic Equity (30 percent)
  • Emerging Market Equity (5 percent)
  • Foreign Developed Equity (15 percent)
  • Real Estate Investment Trusts (20 percent)
  • U.S. Treasury Notes and Bonds (15 percent)
  • U.S. Treasury Inflation-Protection Securities, or TIPS (15 percent)

You don't have to follow this model, you can start with one or two and slowly add more to suit your specific long term goals.

Finding Index Funds to Start Off With

Some index funds require that you have a minimum. Even if you are limited on your budget, there are ways you can go ahead and invest.

I went ahead and searched for some index funds for you to start off with. Here are 5 index funds that have a minimum requirement of $250 or less to open:

  • Schwab S&P 500 Index Fund (SWPPX) – $100 minimum
  • Schwab Total Stock Market Index Fund (SWTSX) – $100 minimum
  • Schwab 1000 Index Fund®(SNXFX)
  • Schwab Small-Cap Index Fund®(SWSSX)
  • Schwab International Index Fund®(SWISX)

Here are 5 index funds that have a minimum requirement of $1,000 or less to open:

  • Homestead Stock Index (HSTIX) – $500 minimum
  • Vanguard STAR Fund (VGSTX) – $1,000 minimum
  • T. Rowe Price International Equity Index Fund (PIEQX) – $1,000 minimum
  • T. Rowe Price Equity Index 500 Fund (PREIX) – $1,000 minimum
  • T. Rowe Price Spectrum Growth (PRSGX)

This isn't a comprehensive list, but it's enough to get your started. You just have to look over and see if it's right for you.

Betterment: Easy Investing

If you believe in passive investing and you’re an investor looking for a simple, no hassle option, then I think Betterment could be a good for for you.

One concern for new and would be investors is how risky it seems. They see the news and wonder if putting their money into the stock market is the right move for them.  How can tell when they should buy low and sell high? What metrics can they use to find out how to time the market?

There are definitely people who find it easier and more successful to work with index funds. Schultheis, author of  The New Coffeehouse Investor, provides plenty of data on the historical returns of the stock market from 1926-2008. He persuasively argues that by comparing different investment vehicles, long term investing is not as risky as some imagine.

If you’re interested, you can sign up for a new account at Betterment here.

Target Funds – Keeping It Simple for Your Retirement Portfolio

What if you don't want to buy several funds? You may want something quick and easy that will take care of asset allocation automatically.

Target date funds can give you all of that. Most target date funds are listed by estimated date of retirement with 5 year increments.

Based on Vanguard's guide, here are some target funds  dates to examine based on age:

  • Age 18-22 : 2055
  • Age 23-27: 2050
  • Age 28-32: 2045
  • Age 33-37: 2040
  • Age 38-42: 2035
  • Age 43-47: 2030
  • Age 48-52: 2025
  • Age 53-57: 2020
  • Age 58-62: 2015

As you get closer to retirement, the fund should adjust and become more conservative.

Even though you've invested your money into a target-date fund, that doesn't mean you just forget about it. Check to make sure the fund is meeting expectations and is adjust the portfolio accordingly.

Automating Contributions

The easiest way to stay on target for your investment goals is to go ahead and automate your IRA contributions. It has certainly helped me avoid skipping deposits.

The advantage of starting early is the benefit of compound interest. The two most important factors for obtaining the benefit of compound interest are the interest rate and the length of time your money earns interest.

The latter is the most important; your investment will grow slowly at first, but over the long term you will see dramatic improvements.

My advice is to at least have an emergency fund in place and pay off any debt that's higher than 12% before you start investing into your IRA.

Sometimes our mental accounting makes us believe that if we have some money invested it'll offset the debt we have.

It's better to have money available for immediate access and to not have debt collectors harassing you over credit card bills.

Where to Invest?

If you're looking for companies to invest in, here are a few suggestions:

You may also want to check with your local bank or credit union to compare fees and expenses.

Increasing Contributions

While you are limited on what you can contribute now, you should plan ahead for when you can increase your deposits. Hopefully, you'll be able to start maxing out your IRA each year. Currently, annual contribution limits to Roth and Traditional IRAs are $6,000.

Don't forget that these are for individuals, so a couple can contribute $12,000 into IRAs (between them). If you break that down, that would be about $415/month for a person or $830/month for couples.

It can definitely seem like a huge amount, but if you simply increase your contribution every time you get a raise, you'll be surprised at how quickly you can do it.

Jump-starting Your Retirement Investing

I'd like to hear your take on investing and where to begin. How have you started with your investing? What was the most difficult step in setting it up? Was it easier or harder than you expected?

If you're getting a bonus this year or you'll be getting a tax refund next year, have you considered using some or all of it to get started?

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

22 comments add your comment

  1. For me, investing started with my first paycheck out of college when I started contributing to my 401k. We had a lot of debt starting out, so that was our only investment. We had to pay student loans, wedding loans, car payments, blah blah blah. Once that was taken care of, we moved on to American Century mutual funds. We now have college funds, 401ks, mutual funds, savings accounts and such but I don’t think we are as diversified as we should be. We have gotten a little older each year, yet we have not reduced our risk as much as we should have.

    • I’m impressed to see how you started early and built from there. With debt, investing can be a tricky decision. I know some people completely hold off while others send a little just to get in the habit of investing. Congrats on having your financial house in order!

  2. We haven’t done much investing yet outside of my 401k plan because we’re focusing more on getting out of debt first. But I agree with you that index funds are the way to go. Minimizing expenses and not trying to time the market are two benefits of index funds that not everyone appreciates.

  3. This was a great post because it shows how little you need to start investing. There are more people out there that needs that little push to get started. So many put off starting when they go through the trade publications because it’s confusing. I like the index fund recommendations, its a basic meat and potatoes style.

  4. We’re considering investing starting with an IRA. How does that work? Do we open a joint account? I think we can fork over enough to max out but we would have to be truly aggressive. Also, when you say the maximum per year, when does the year start/stop? The day you open the account? January 1? April?

    • You can each open your own IRA. Sharebuilder is extremely easy to open an IRA with, but you should check with your bank or credit union to see what they can offer.

      Good question about contribution year! While it’s $5,000 for 2010, 2011 etc, you can pay into the current year until you file your taxes. So if you file your taxes February 2011, you can use January to contribute to your 2010 limit.

  5. This is really informative, I learned a lot. I wanna retire early at about 45 years old and just spend the remaining time with my family and kids. I really liked how fluid your article is, a great food for thought. Thank you so much for sharing this with us!

  6. Hi, I think if you get a Schwab account, you do not have to pay the minimums to buy shares. There are probably ETF versions of these funds which would allow you to invest less without any commissions. You can set up your portfolio (aggressive, medium, low) and then buy different ETFs according to your risk tolerance.

    I’ve also been thinking of switching away from SmartyPig and going with 100% at Betterment. I’m hoping for a positive return, but better than 0.70% APY. Think this is a bad idea? I like Betterment because you can add & withdraw from your checking easily.